A s fears about rising interest rates calmed, financial stocks took off in the third quarter -- especially as investors looked for alternatives to volatile tech stocks. Merger and acquisition activity continued, with financial powerhouses such as Chase Manhattan Bank and J.P. Morgan joining forces.

Some of our biggest winners weren't among the banks and brokers, however (although
Morgan Stanley Dean Witter
is up some 36% since we mentioned it favorably on May 30); they were in the less-glamorous insurance industry, which now appears to be emerging from a sleep worthy of Rip Van Winkle.

Property and casualty insurance companies are coming out of a decade-long slump, as we pointed out on May 3. Analysts and fund managers said that the sector had hit rock bottom, and had nowhere to go but up. So far, they look like they've been right: Shares of
ACE Limited
have gained 56% since the story ran, while Bermuda-based
XL Capital
is up 55%.

Life insurance stocks have had the biggest rally.
AXA Financial
has gained 40% since our May 9th story accurately predicted that French parent AXA Group would buy out AXA Financial. (AXA Financial also will sell its 71% stake in
Donaldson Lufkin & Jenrette
to Credit Suisse First Boston.)

After years of being out of favor, the cyclical reinsurance industry also is on the rebound. (Reinsurers assume the catastrophic portion of the risk P&C companies underwrite.) A July 11 story stated that premium increases would bolster top-line growth at those companies. That's apparently already happening for two companies we mentioned:
PartnerRe
, which has gained 30%, and
Everest Re
, which has gained 41%.

Some energy stocks we highlighted have done well, too, benefiting from the big runup in oil prices. In this area, we tended to be early -- and right.

On January 26, Weekday Trader said that shares of
El Paso Energy
, the natural gas company based in Houston, looked undervalued. The story noted that the company's planned acquisition of Coastal Corporation, a leading domestic exploration and production player, looked like a good fit. The shares are now up about 90% since the story appeared.

Another energy stock that's panned out for us has been
Diamond Offshore Drilling
, which specializes in mid-range and deep-water ocean drilling. When we profiled the company favorably on February 28, its shares were lagging many of its peers.

Since then, the stock has rallied nicely as crude prices continue to climb. Diamond now fetches 41, up 40% since late February.

Last November 22, we said that some exploration and production companies would profit from the rising price of crude. Among the best performers have been
Cooper Cameron
, up 65%, and
Dril-Quip
, up 45%.

Other beneficiaries of higher petroleum prices include providers of natural gas, which is often brought out of the earth with oil. Natural gas and electricity utility
Duke Energy
, which we wrote about favorably on April 26, is up about 44% and hit an all-time high last month.

We notched some victories in other areas, too. Shares of Seattle-based
Boeing
are up about 45% since we wrote about the company favorably on January 6. Similarly,
Northrup Grumman
looked like a good buy when we profiled the company on July 27. The shares now change hands at 90.63, about 30% higher than where they stood in late July.

On September 23, 1999, Weekday Trader asserted that homebuilding stocks looked undervalued and poised for a comeback.
Lennar
trades at 29.75, up 80% from when our story ran. Similarly,
D.R. Horton
shares have appreciated by about 35% while
Centex
is up more than 15%.

We also had good luck in Las Vegas -- writing favorably about
Harrah's Entertainment
, that is. Shares of the casino operator trade north of 27, about 40% higher than their price when our story ran on March 2.

Another "leisure time" stock,
Anheuser-Bush
, hasn't gone flat, either. Far from it. Its shares are up about 25% since we cited it favorably on April 5th.

And the share price of
Brunswick
-- an Old Economy company if there ever was one -- has appreciated 20% since we gave it a nod on March 7. The company announced it would divest its money-losing bicycle, camping and fishing enterprises to focus on core businesses like boating. After Brunswick reported improved earnings, CIBC World Markets upgraded the stock to Buy from Hold in August.

This story was written by Dimitra DeFotis, Allison Krampf, Lawrence Strauss and Evelyn Ellison Twitchell.

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